Happy Friday! On Tuesday of this holiday-shortened week, May retail sales came in up 0.1%, slightly below expectations of 0.2%. That helped push down bond yields and helped propel the S&P 500 and Nasdaq indices to new highs. A slowdown in consumer spending has not deterred the major indices.

REITs were mixed, with about 55% in the red this week. The Vanguard Real Estate Index Fund ETF (NYSEARCA: VNQ) was off about half a percent this week.

In This Issue: JP Morgan gives a big thumbs up to Residential REITs, Viceroy Research doubles down against Arbor Realty (but investors don’t care) and the state of Florida decides to get tough on condominium boards.

REIT ON!

PRESENTED BY DLP CAPITAL

Unlock Financial Success With This Innovative REIT

Unlock greater financial opportunities and security with real estate investments that can help you achieve consistent double-digit returns.

• DLP Housing Fund: 10-12% targeted annual net return, 6% preferred return paid monthly.

• DLP Building Communities Fund: 11-13% targeted annual net return. 8% preferred return paid quarterly.

There’s more, including the DLP Lending Fund and the DLP Preferred Credit Fund. 

Reach out to our Investor Success team today.

REIT ROUNDUP:

Site Centers Corp (NYSE: SITC) June 13, announced it sold a six-property shopping center portfolio to an affiliate of Chicago based Pine Tree for $495 million. The open-air centers were located in Ohio, Arizona, Florida and Oregon.

Rexford Industrial Realty Inc (NYSE: REXR) June 17, announced it’s promoting CFO Laura Clark to COO and will recruit for a new CFO.

Equity Commonwealth (NYSE: EQC) June 18, announced it will repurchase up to an additional $150 million of its common shares under the existing share repurchase program from July 1, 2024 through June 30, 2025.

Dividend News:

Chimera Investment Corporation (NYSE: CIM) June 13, increased its quarterly dividend from $0.33 to $0.35 per share.

WP Carey Inc (NYSE: WPC) June 13, increased its quarterly dividend from $0.8650 to $0.87 per share, payable July 15 to shareholders as of June 28.

Innovative Industrial Properties Inc (NYSE: IIPR) June 14, increased its quarterly dividend by 4.4% from $1.82 to $1.90 per share. The dividend is payable on July 15 to shareholders of record on June 28. 

WINNERS & LOSERS

📈 Biggest Winners This Week: Office and Residential REITs

• City Office REIT Inc (NYSE: CIO) Up 4.54%

• Piedmont Office Realty Trust Inc (NYSE: PDM) Up 4.43%

• NewLake Capital Partners Inc (OTCMKTS: NLCP) Up 3.77%

• Alpine Income Property Trust Inc (NYSE: PINE) Up 3.69%

• Equity Residential (NYSE: EQR) Up 2.35%

• Highwoods Properties Inc (NYSE: HIW) Up 2.27%

📉 Biggest Losers This Week: Retail REITs

• Industrial Logistics Property Trust (Nasdaq: ILPT) Down 9.97%

• Peakstone Realty Trust (NYSE: PKST) Down 5.40%

• Veris Residential Inc (NYSE: VRE) Down 5.38%

• Orion Office REIT Inc (NYSE: ONLY) Down 4.34%

• Clipper Realty Inc (NYSE: CLPR) Down 4.32%

• Crown Castle Inc (NYSE: CCI) Down 4.18%

• Simon Property Group Inc (NYSE: SPG) Down 4.10%

ONE BIG THING

JP Morgan Raises Price Targets on 8 Residential REITs In One Day

What: On June 17, JP Morgan analyst Anthony Paolone raised price targets on eight Residential REITs in one morning, while maintaining his previous positions on all of them.

Who: Anthony Paolone is a stock analyst at JP Morgan. Stock Analysis rates him #627 out of 4,458 analysts. Mr. Paolone has a 61.54% success rate with an average return of 6.77%.

Why: A few months ago, analysts seemed to worry about the new construction of apartments and rental homes increasing the competition for renters and rental dollars. They may be beginning to realize that with real estate prices and mortgage rates remaining high, there are few other options for most renters but to stay in place.

In addition, newly constructed home and apartment rental prices would likely be higher than pre-existing units due to increased materials and labor costs. It also costs more to move than ever before. According to CNBC, 53% of Americans who moved in 2023 were surprised at how expensive moving was. Nerd Wallet estimates the average local move is about $2,500 and a long-distance move of 100 miles or more to be $4,582. But a move from the Northeast to California or the Northwest could be more than double that amount.

Some Gen Z and Millennial-aged renters have also decided to max out credit cards and live it up, figuring they have no chance of ever being able to purchase a home. This of course is a self-defeating strategy and the addition of new debt and depletion of savings will act as a deterrent, even if prices and interest rates begin to decline.

Therefore, rents have stabilized and Residential REITs continue to perform well in 2024. The eight REITs on which the analyst raised target prices have all had positive total returns year-to-date. Essex Property Trust Inc (NYSE: ESS) leads the group with a total return of 11.60%, and analyst Paolone has smartly increased its target price more than any other REIT.

The chart below details each Residential REIT, its maintained position and old and new target prices:

Takeaway: All signs are positive for the Residential REIT sub-sector, and it remains one of the best REIT sub-sectors for the immediate future.

Game Changer: Florida Gets Tough On Condo Boards

What: Governor Ron DeSantis of Florida just signed a bill to increase the rights of condo owners and reform the laws governing community associations. The new law is called “Condo 3.0” and it increases the requirements on Condominium Board members and gives the state of Florida more authority to investigate condo member complaints.

The bill, HB 1021, was sponsored by Representative Vicki Lopez (R: FL) of Miami, who called its passage a “game changer”. For the first time, the Florida Department of Business and Professional Regulation (DBPR) will be able to investigate complaints of corruption and unfair governance against condominium boards. Some of the highlights of the bill include:

• New board members must complete four education hours on how to run a condo association.

• Boards must meet four times a year, an increase from the current two times a year in the law.

• The present requirement of condos with at least 150 units to set up web pages with bylaws, budges and lists of vendor contracts has been reduced to condos with at least 25 units.

• Boards are barred from filing defamation lawsuits against dissenters as retaliation or to silent dissent.

Why: An investigation by the South Florida Sun-Sentinel last year turned up numerous instances of defamation suits and other condo and Homeowners Association (HOA) abuses. Florida has 1.5 million condo units, more than any other state. With so many Florida residents living in condominiums, there was great political pressure brought to bear on legislators to do something to stop the abuses.

Takeaway: While the bill offers several positive changes to the current system, one consequence of the bill could be that condominium owners will be more reluctant to get involved in their association boards. These are unpaid positions and the new law will require more time and work from board members.

It will be interesting to see if these changes in Florida are also enacted by other states with large numbers of condominium residents, such as New York and California.

ONE FOR THE ROAD

Viceroy Research Ups The Ante, Attacks Arbor Realty Once Again

Who: Arbor Realty Trust Inc (NYSE: ABR) is a Long Island-based mortgage REIT (mREIT) that initiates bridge and mezzanine loans for commercial and residential properties. Many of its loans originate through Fannie Mae or Freddie Mac programs. ABR generates profits by the spread between the loan financing cost and the interest earned from that loan. Many of its commercial loans are short-term, first mortgage liens with higher interest rates.

What: As we detailed here a few weeks ago, for months, short seller Viceroy Research has been publicly chastising Arbor Realty. In February, Viceroy called ABR’s Q4 earnings report “Baloney with a side of Flimflam” and followed that up in March with a report called, “Arbor-The Cream of The Flop”. In May, Viceroy released a report accusing ABR of fraud, saying Arbor hid losses by financing asset purchases from its own foreclosures in off-balance-sheet transactions. It also accused Arbor of fraudulently overstating the value of its loan book via undisclosed off-balance sheet, related party transactions.”

Arbor has repeatedly denied all accusations of wrongdoing and the stock has been volatile after each attack and defense. But now, Viceroy has upped the ante by writing to Citizens Financial Group, the parent company of JMP Securities, which manages Arbor’s “At-The-Market (ATM) offering and share buyback. The letter accuses Arbor of collapsing its approximate $700 million 2021 FL2 Collateralized Debt Obligation (CLO) tranche without informing the market in an official SEC filing or other publicly available investor communication in an attempt to hide poor performance. This violated continuous disclosure practices.

Why: Viceroy asserts in its letter that “a listed company with an ATM program is not permitted to sell securities while in possession of material non-public information or if the disclosures contained in or incorporated into its prospectus and prospectus supplement for the ATM offering have become untrue or misleading in any material respect.”

Takeaway: At some point, investors will learn whether these many accusations are just a means for Viceroy to profit off short positions or if the charges they’re making do have merit.

On June 20, JMP Securities analyst Steven Delaney maintained Arbor Realty Trust with a Market Outperform rating and lowered the price target from $17 to $16.

One might think that this newest Viceroy announcement would knock ABR’s share price down, but in the morning following the release of the letter, ABR was trading up by almost 1%. Maybe investors are tired of all the attacks that have yet to be confirmed by the SEC or any other entity.

Stay tuned for future updates.

PRESENTED BY DLP CAPITAL

Unlock Financial Success With This Innovative REIT

Unlock greater financial opportunities and security with real estate investments that can help you achieve consistent double-digit returns.

• DLP Housing Fund: 10-12% targeted annual net return, 6% preferred return paid monthly.

• DLP Building Communities Fund: 11-13% targeted annual net return. 8% preferred return paid quarterly.

There’s more, including the DLP Lending Fund and the DLP Preferred Credit Fund. 

Reach out to our Investor Success team today.

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